Manhattan condos commanding higher prices than co-ops.
The Board based its conclusion on an examination of 3,845 condo and 3,116 coop transfers that occurred between January 1, 1997 and March 31, 1998. REBNY's reconnaissance breaks sales data down by four geographical areas - all of Manhattan, the East Side (from 42nd to 96th streets), the West Side (from 42nd to 110th streets), and Downtown (south of 42nd Street) - and, within each of these districts, by pre- or post-war building vintage and unit size.
Two factors contributed most to the pricing disparity between cooperative and condominium apartments, according to REBNY Executive Vice President Deborah Beck. First, co-op prices are generally discounted just to offset the building's underlying mortgage, which is carried by its shareholders through higher monthly carrying costs. Condominiums have no such mortgage.
Second, co-op boards of directors' powers to approve or reject potential purchasers and to prohibit or limit subletting make comparable condominiums more appealing to many buyers - and therefore potentially more expensive. Condominiums are not subject to such restrictions. However, Beck noted that the generally accepted "rule of thumb" of a 25 percent price differential "is not universally applicable and therefore insufficiently descriptive. Our survey revealed many variations in the relationship between co-op and condo prices that are based on apartment size."
Specifically, REBNY found that for prewar properties, the condominium premium was as high as 47 percent for small units, but descended with increases in apartment size, disappearing at units of 1,500 square feet. From that size and larger, comparable pre-war co-ops commanded higher prices. In the case of post-war units - which account for the vast majority of condominiums - the condo premium applied for all apartment sizes. The median price premium for postwar condos was 42 percent.
Here are some of REBNY's findings for each area surveyed.
Manhattan: Median price per square foot for pre-war condos was about 4 percent higher than coops - $312 per square foot versus $300 per square foot. This difference did not prevail, however, for all apartment sizes. For units with 650 square feet or less, for example, condo prices were an eye-opening 47 percent higher than co-op prices. The condo premium was inversely proportional to unit size - dwindling as larger units were compared, and ultimately reversed, starting with 1,501 to 1,800 square-foot range.
For post-war units, condo prices were significantly higher regardless of unit size: the median price per square foot for all sales was $329 for condos and $231 for coops - a 42 percent condominium premium.
East Side: Following the general trend in the Manhattan market, the condo premium for pre-war apartments was highest for smaller units, and negligible for larger units. Overall, pre-war condos fetched 10 percent more than comparable co-ops. In the post-war submarket, condo prices were 55 percent higher.
West Side: In the pre-war category, coops sold for 12 percent less than condos. Although similar owner-occupied apartments of 1,500 square-feet revealed no price differential between co-ops and condos, REBNY observed that the paucity of sales in this group rendered this finding somewhat inconclusive. Post-war condos fetched 48 percent more per square foot on average than did comparable co-ops.
Downtown: Pre-war condos commanded a 28 percent higher price than co-ops, at $305 per square foot versus $238 per square foot. In the post-war submarket, condos fetched 43 percent more than comparable co-op units. Median prices were $292 per square foot and $204 per square foot, respectively.
Beck noted that while the Board's data provided valid comparisons, some qualifications are in order. For example, while REBNY had access to all condo sales - which are a matter of public record - it could not obtain prices for every co-op transaction. The Board's co-op data was limited to sales reported by participating member firms. REBNY estimates that its co-op data accounts for approximately half of the market's total sales.
On another point, no adjustment was made for differences in amenities among units; units of the same size, location and age were assumed to offer similar amenities.
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|Publication:||Real Estate Weekly|
|Date:||Dec 16, 1998|
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